Transcript:
Easan Arulanantham:
So was this a question about long term care? You know, what is self insured long term care? And you know, what are the benefits of being self insured over a policy of just a standard long term care policy or a rider on a, like a universal whole life insurance policy?
Tom Vaughan:
Yeah, that’s a really good question. Actually. It’s kind of fun to dig through this. So here’s how I look at it. If I take your financial plan, and I run Monte Carlo simulation, and it is successful, so it’s at least 85%, of the Monte Carlo simulation, you know, success rate is 85% or higher. That’s great. And then if I go in, and I push the button to add long term care costs, let’s say you or your spouse goes into long term care costs x amount per year, and you go in for X number of years, sometimes I’ll be pretty aggressive with that. If you’re still at 85%, or higher, and your success rate, even with that potential outcome, I consider that self insured just means that your overall situation financially could absorb that scenario, and still have a very high probability to success. So that’s self insured. Now, what if I push in the long term care for somebody and it doesn’t work, it drops them back into the 40% range or something probability success, what that means is that that couple or person is very susceptible to the possibility of long term care really, really messing up their financial future. And so those people need to be looking at a policy to kind of ensure that it’s the same thing, kind of million dollar house that gets wiped out in some natural disaster, you know, can we insure those because it’s kind of a big deal trying to replace that, that the big asset we’re trying to protect, you know, those types of things. So this would be one of those ways that you could do that is to have that long term care insurance policies, there’s lots of different kinds, there’s, there’s portions that have a whole life built in, they go the other way, their whole life policies that have a, you know, long term care rider built in, and there’s, there’s a million different ways of doing it.
But first and foremost, you know, figuring out whether your needs or not, I think is important. Now, sometimes I run into people, and it’s not that uncommon, actually, where they don’t need it, they’re self insured, but they want it, that just makes them feel better. And they want to make sure that, you know, if it happens to them, that it’s just more insured out, these are people that can afford it, because their plan is very, you know, very well designed in terms of their probability of success is very high. So I do have quite a few people that have long term care insurance policies that don’t need it, at least from a self insurance standpoint. But that’s just sort of a different thing. They like insurance, they want to make sure things are covered. And a long term care insurance policy can actually be a good investment if you actually need it. So for example, if I had to pay 6000, a year, for 10 years, I paid $60,000 into that, and I had a long term care insurance policy that would pay out $300,000 Max, you know, some kind of cap, I’m making these numbers up, but obviously, that’s a good investment, I put in 60. And then it paid 300 out, right? That’s that works. But as with most insurance, you know, I’ve paid for lots of different insurances that I’ve never used. And I’m pretty happy with that, to be honest. But that could happen with long term care. Also, I paid that $60,000 And then got ran over by a bus didn’t need the long term care insurance. And so that, you know, it just but that’s part of the picture for those people that do end up using it, they become good investments in that regards. And so I do have some clients right now drawing off some long term care insurance policies. They’re glad they have, you know, and so that that’s, that’s an issue as far as that goes.
Easan Arulanantham:
Yeah. And so, peace of mind is is really key when it comes to these kind of policies to you know, if you sleep better at night, paying the extra little premium for long term care policy. That’s worthwhile.
Tom Vaughan:
Yeah, I like and I happen to have a lot of insurance myself. And I just, it makes me feel good. And so I kind of, I have a weird way of looking at it. You know, when I spend money to go to Hawaii, one of my favorite places, I go there because it makes me feel good. You know, and I feel good when I get back and I just I’d like why, for whatever reason, and you know, it’s the same thing with insurance for me. The insurance that I have, you know, flood, earthquake and house insurance, car insurance. I have big umbrellas. I don’t know. It just makes me feel good. And I know it’s expensive. I probably, you know, have been wasted my money to a certain degree, but there is an aspect of it that I think’s important, just from a mental well being I’d like knowing that, you know, what I have built up here I can try to protect. And so long term care insurance would be really trying to protect that asset base and or a spouse who was still at home, you know, that kind of thing. So, yeah, it’s an interesting area, but that it’s a little bit personal as to how people look at that and, you know, everybody’s a little different there.